Mar 30, 2010

We're in debt up to our eyebrows and I'm scouting for new places to cut back. I think I've truly gotten down to the bare basics, but I'm just sure that I can find places to squeeze those coins just a little harder. Here's what we've already done (most for several years):

No cable or satellite

Videos come from the library or SwapaDVD.com

Only one cell phone (husband's work, so we have to keep it)

Basic phone package

Keep heat low and sparingly use the AC

Keep a budget of around $250 a month for groceries for 3 people (We're working on reducing that)

9
comments:

You guys are to be commended for trying to keep such a tight leash on your spending. I know it's really hard sometimes.

I went back through and looked at your budget and it doesn't look like you have much wiggle room at all. The only thing I can suggest is for you and hubby to look at your IRA contributions.

Normally I hate to discourage anyone from saving for retirement, esp if you are doing a standard IRA where the contributions are tax deductable. You guys have probably already done this, but you may want to weigh out your debt and how long your repayment schedule is vs. what you are putting into the IRA and what you want your retirement to look like (when, how much will you be needing to spend monthly in retirement, and if your house will be paid off by then).

You may find that it is possible to reduce your IRA savings-- just temporarily so that you can get the debt paid off much faster and then be done with it.

Another idea: is there any way you could qualify to refinance to a lower rate on your mortage under one of Obama's special deals? If you already have a fixed rate, you still might be able to do it.

Hmm. It does sound like you've tightened up quite a bit! I'm young and up to my eyebrows in debt myself (although I'm down to "only" $65k in debt - half what I had two years ago), so I don't have much personal insight to offer, but I do listen to a lot of Dave Ramsey... ;) So I'm going to take a guess at what he'd say if you were a caller on his show.

Dave Ramsey always asks first about your house and cars, relative to your household income. You mentioned the cars here, and based on February's budget post, your mortgage payment is well within the range of what he accepts as reasonable... (Although I think he would verify that you have a sane mortgage as opposed to one of those interest-only balloon deals, but I'm sure you do.) So I think you're doing fine there.

He would, however, tell you to cut out the IRA (TEMPORARILY!) in order to get out of debt. Assuming I'm correctly applying his principles here, I think he would tell you to cut the IRA entirely (no matter the match), and cut out all charitable giving beyond a 10% tithe (it appears that you're a little higher than that, but I could simply be miscalculating - I don't exactly have the FULL picture). Then he'd encourage you to not only continue to sell off everything you can spare and cut groceries to a minimum, but also to cut dining out entirely ("You don't see the inside of a restaurant unless you're working there!") and to pursue extra hours at work, extra cash (however small) from advertising on this blog, extra money through creative means (maybe you could cut friends' kids hair from your home for a small fee?), etc.

Every extra penny you can earn or save goes to an emergency fund until you have $1000 there - just a baby fund in case something bad happens. Once that is accomplished, you put every extra penny you can earn or save into your smallest debt. Once it is eliminated, you put that minimum payment plus every extra penny you can earn or save into the next smallest debt, and so on.

Also... Looking at the budget post from February, I see $410/month going to cars. You stated here that the cars are paid off, so would these be maintenance/replacement savings? I believe that Dave would advocate stopping that as well (TEMPORARILY!) in order to get rid of the debt. Obviously some maintenance, such as oil changes will still be required, but I wouldn't expect $410/mo to be necessary. Any big things that do come up, of course, you pay from the emergency fund and then replenish the fund from your "debt snowball" before continuing to kill the debt.

(We cover all of our oil changes with mystery shopping - which may be available in your area? Volition has a massive list of companies (http://www.volition.com/mysteryUSA1.html) with reviews/notes on most of them - it might be a place to start if you're interested...),

In fact, if you have money stashed in a "car maintenance" fund, my belief is that he would advocate using that money to fund your baby emergency fund and to get a jump-start on your debt snowball.

Assuming that I'm right about the maintenance money, you clearly have at least $743 (IRA + cars) each month that could be (TEMPORARILY!) redirected to getting rid of your debt. This is in addition to any jump-start money you might have, extra money you might make, extra cuts you manage in groceries and other expenses, and whatever money you are currently spending on eating out or other discretionary things that could be cut.

(Would it be possible to switch to a cheaper cell provider? In my area, we have MetroPCS, which offers $40/mo plans if you don't travel much - that plus a pay-as-you-go plan for any travel could offer savings if it's allowable?)

Based on my own situation, I'm guessing that $600/mo in debt minimums means that you have in the ballpark of $20-40k in total debt. With JUST the $741/mo and NOT counting the snowball effect of paying off debts, you're STILL only looking at about 3 years to get rid of ALL of your debt - I bet you could do it in 2 with the creativity you've shown here!

And once that debt is gone, you go right back to your IRA contributions and your car maintenance - PLUS you have an extra $600 every month to catch up on the missed contributions, if you so desire, to reinstate the dining out budget, and to continue saving toward financial stability (and building that house you were talking about...).

(Actually, Dave Ramsey advocates continuing this high-intensity path until you have a full 3- to 6-month emergency fund, then going to a 15% retirement contribution, saving for college, paying off your home early, and then REALLY living like noone else. But I'm going for the abbreviated version here (which may already be longer than your post!)... If you decide to go this route, I do highly recommend looking into his complete plan - http://www.daveramsey.com/new/baby-steps)

Of course, those two years aren't much fun, and you and your husband have to WANT it. But you did ask what else you can do; this is the only real suggestion I have - get "gazelle intense" and cut the DEBT from your budget!

** Also, I feel obliged to point out that Dave advocates these cuts ONLY if you are serious about getting rid of the debt. If you cut the IRA and then spend the money on eating out, you've only made your situation worse. If you cut the IRA and then waste 20 years "sort of" working on getting out of debt, then you've destroyed your retirement. If, however, you can really focus on ditching the debt FAST, it will be worth the short delay.

((( Yeah, so that was a long post - not only did TWO other people comment while I was writing it, but Blogger wouldn't even accept the thing in its entirety! lol. Hope you don't mind my rambling... )))

I was so excited that I somehow hit a button that sent my comment before I was finished LOL!

I appreciate you taking your time to look at my budget and then make some fantastic suggestions. I will share these with my husband and see how to implement them.

I was starting to feel like I was down to a level of penny-pinching that wasn't going to amount to very much any time soon. Your ideas make great sense.

We actually stopped the IRA for about six months a couple of years ago because of some lean times. I'd forgotten about that until you mentioned it.

We are definitely committed to getting this gorilla off of our backs!

We've actually got a small ($1500) emergency fund in place, thankfully. I'm looking forward to the day when we can have six months of income laid by.

The extra in Tithe and Offering is there for our pledge to the building fund and for any special speakers who come in (to explain the discrepancy).

The cars being high is a puzzle. We live out in the boonies (half an hour to just about anywhere we need to go). Gas eats up quite a bit of that money (especially for husband). There's also budgeted amounts for repairs. I'll have to go and look through that number again and see what's up with it.

We've got the cheapest cellphone deal that provides for my husband's work needs. We're just in a state where we are limited to only 3 providers (none of the cheap ones!).

I'm ready to go in and examine it all with a fine-toothed comb and see if we can really get this gorilla moving in the right direction.

Trixie, Lita, and Rini--thank you SO much. You have lit a fire under me!!! (I'm so glad I decided to post about this!)

I FIANLLY (haha) got all of your blog posts read and am up to date. I am with you 100% on this debt elimination game. I am right now culing through what my family spends on groceries (our major expense) to pare it down to the minimums. I took a job, but that didn't work out. It is nigh on impossible to work out when you have 4 kids. Wasn't happening.

We don't have alot of credit card debt (about $5,000) it is TWO vehicle loans. That, and our income dropped nearly $12,000 last year from the previous year.

So, we have knuckled down, I am budgeting everything out that I can. However, me no longer working and adding another kid just tightened our world up to no end.

I will pray for you and hubby that yo will find ways to cut that debt down promptly and with joy.